What is the apprenticeship levy?

Written by Ellie Taylor on .

We are pleased to announce the launch of Easy Apprenticeships, our new apprenticeship gateway and recruitment solution for businesses all across the UK! This week’s blog post is a re-share of an article first published on the Easy Apprenticeships website.

One thing that can scare an employer away from offering an apprenticeship scheme is funding. Hiring an apprentice means extra costs, both to cover training and the apprentice’s salary, which can be a financial challenge for smaller businesses.

However, help is at hand, all thanks to the apprenticeship levy!

Confused by what that means? Don’t worry. In this week’s blog, we’ll explain what the apprenticeship levy is, and how you as an employer can benefit from it. 

What is the apprenticeship levy?

The apprenticeship levy was introduced in 2017 as a scheme for funding apprenticeships. Employers pay this levy to help cover the costs of apprenticeship training, and improve both the quality and quantity of apprenticeships.

Employers with an annual payroll of over £3 million must pay a 0.5% levy on their total payroll, whether they employ an apprentice or not. This is paid monthly through PAYE, along with income tax and national insurance contributions. An allowance of £15,000 helps to offset this contribution, which your business can use to arrange and pay for apprenticeship training. After 24 months, any unused levy funds expire, and are returned to the government. 

What if my company isn’t paying the apprenticeship levy?

If your company’s annual payroll is less than £3 million, you do not have to pay for the levy. Instead, you only have to cover 5% of the cost of any apprenticeship scheme you offer, and the government pays for the other 95% through co-investment. This means that smaller businesses can still access apprenticeship programmes, and enjoy the benefits that these bring to a company.

Who can use the apprenticeship levy?

The apprenticeship levy can only be used for businesses that operate within England, because legislation varies across the other devolved nations of the UK. Because of this, any apprentice who is funded by the levy must spend at least 50% of their working time in England.

Smaller companies are able to benefit from government co-investment because of the levy, which larger businesses pay for. However, employers that do not pay the levy can only hire up to 10 apprentice starts per year. 

If you’re unsure whether your business is eligible for the levy, give us a call on 0203 982 7600, and our experienced team will be able to run you through your options. 

What other funding options for apprenticeships does my business have?

There are several government incentives in place to encourage employers to hire apprentices. Alongside the co-investment option for employers that do not pay the levy, these incentives include:

  • A £1000 payment for hiring an apprentice between the ages of 16 and 18, to help with the financial costs of taking on a younger employee. 
  • A £1000 payment for hiring an apprentice between the ages of 19 and 24 who has previously been in care. 
  • No cost for small businesses (less than 50 employees) to train an apprentice between the ages of 19 and 24 who has previously been in care.

If your business does not already pay the apprenticeship levy, you may also be eligible for a levy transfer. This is when another levy-paying employer sends a portion of their levy funds to another business, with the full amount going towards training an apprentice. Levy-paying employers that send funds can only transfer 25% of their annual funds (£3750), and can make transfers to as many other levy-receiving employers as they like.

You should also make sure you’re familiar with the different apprentice funding bands that are available, which are set in line with current apprentice frameworks and standards. 

Get started today with Easy Apprenticeships

At Easy Apprenticeships, we’ll help you with every step of the apprenticeship process, from finding the right training provider to securing funding. Call us today on 0203 982 7600 to speak with a member of our team, or visit our website to find out more!